January 16, 2013 / 12:20 PM / in 5 years

TUI AG shareholders eye takeover by TUI Travel - sources

FRANKFURT, Jan 16 (Reuters) - The owners of TUI AG are discussing a reverse takeover to combine the German travel and tourism group with its UK-based subsidiary TUI Travel in a bid to cut costs, three sources close to the companies and their shareholders said.

“The idea is to bring two companies that operate in same industry together. It is a story of synergies,” a source close to one of the shareholders said. “It is being discussed right now that TUI Travel buys TUI AG,” he added.

TUI AG owns 56.4 percent of TUI Travel, Europe’s largest tour operator formed after the merger of TUI AG’s travel business and British peer First Choice in 2007.

Both groups currently have their own headquarters - in Hanover, Germany, and London respectively - and a merger could potentially lift more than 500 million euros ($667.4 million) in synergies, two sources said.

Analysts, however, have calculated a much lower number closer to 100 million euros.

While TUI AG’s main shareholders Alexey Mordashov and John Fredriksen are lobbying for the idea of the reverse takeover, many people at TUI AG oppose such a plan, fearing the German operations would be sidelined, the sources said.

One of the sources said the original idea of buying the rest of TUI Travel shares was not feasible because TUI AG lacks the necessary funds, and it also has little prospect of successfully raising money on equity markets given it trades at a hefty discount to peers.

“There is no way to get the maths to work (for the original idea),” the source said, adding a reverse takeover for around 10 euros per TUI AG share would create value for shareholders.

TUI AG, TUI Travel Plc and its main shareholders declined to comment.

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